Preparing for retirement is a lifelong journey.

For most Singaporeans, the CPF system provides a foundation for their retirement, together with their personal savings.

Whether you’re starting work, about to buy a home, raising your family, or have years before reaching retirement, you can take simple steps like CPF transfers and cash top-ups to build your CPF savings and add to your monthly employment CPF contributions or self-employed Medisave contributions to secure your future lifestyle.

3 Basic Needs in Retirement

In retirement planning, it is important to first take care of your 3 basic needs so that you can retire with greater peace of mind.

A fully paid up home gives you the security to age in place, without having to worry about rent. Your house can also supplement your retirement income.

Basic healthcare coverage is essential not just in old age but also when you are young. Large medical bills can easily wipe out your retirement nest egg.

A steady stream of lifelong income to meet your daily expenses in your golden years so you don't have to worry about outliving your savings.

CPF is designed to help you meet these 3 basic needs. As you work, you are saving for these basic needs in dedicated accounts with your CPF contributions. When you turn 55, a Retirement Account is created for you.

*This interest rate includes an extra 1% interest paid on the first $60,000 of your combined CPF balances, with up to $20,000 from the OA. This does not include an additional 1% extra interest that CPF members aged 55 and above also earn on the first $30,000 of their combined balances. Members aged 55 and above thus earn up to 6% p.a. on their retirement balances.

CPF helps you save for the future from the day you start working. But you are not saving alone. Your employer helps too. For example, if you are below the age of 55, for every dollar that you contribute to your Special Account, your employer chips in another 85 cents, giving you $1.85.

Grow Your Savings with Compound Interest

With attractive interest rates of up to 5% p.a. when you’re below 55 years old, and up to 6% p.a. when you’re 55 and above, the earlier you act to build up your CPF, the higher your eventual savings will be.

In addition to your working contributions, you can also choose to top up your Special Account with cash and benefit from tax relief of up to $7,000 per year.

You can also make your Ordinary Account savings work harder for you by transferring them to your Special Account (SA). With the power of compound interest, every dollar in your SA will more than double in 20 years’ time. For example, the $1.85 you started with will double to $3.70 in about 20 years, and $7.40 in about 40 years. This is 7 times more than the $1 you contributed!

Growing Your CPF Savings

CPF members have flexibility and options to grow their retirement savings that are suited to different needs and risk appetites.

Investing to Grow Your Savings

Those who have the time and financial expertise can choose to invest in a wide range of products included under the CPF Investment Scheme. But remember, higher expected returns come with higher risks and not all investors can beat the CPF interest rate as this report shows.

If you are willing to take some risk in exchange for potentially higher returns, the upcoming Lifetime Retirement Investment Scheme (LRIS) could just be the solution for you. The LRIS will have low fees, simple investment choices, investments that are passively managed and mechanisms to encourage long term investment. The details will be announced in due course.

Cash Top-Ups and CPF Transfers to Build Your Old Age Savings

For those who are averse to investment risk, and wish to benefit more from the risk-free CPF interest rates, the simplest and most direct way to build-up your old age savings is by making cash top-ups and CPF transfers.

To enjoy higher monthly payouts in retirement, you can make cash top-ups to your SA (if you are below 55) or RA (if you are 55 and above) up to the current Full Retirement Sum or Enhanced Retirement Sum respectively. In addition, you can enjoy tax relief of up to $7,000 per year for cash top-ups to yourself. Conditions apply.

Alternatively, you can transfer the savings from your OA to your SA (if you are below 55) or SA/OA to RA (if you are 55 and above) to earn higher interest. You can transfer an amount up to the current Full Retirement Sum to your SA or the Enhanced Retirement Sum to your RA respectively. As this transfer is not reversible, do plan your finances before initiating this option. More information can be seen here.

Voluntary Contributions to Grow Your CPF Savings

Besides making cash top-ups and CPF transfers into your Special or Retirement Account, you can also make voluntary contributions (VC) into your 3 CPF Accounts or into your MediSave Account.

If you make a VC into the three CPF Accounts, the VC amount you can contribute is the difference between the CPF Annual Limit of $37,740 and the amount of mandatory contributions made for the year. Mandatory contributions include CPF contributions on the Ordinary and Additional Wages for employees, and MediSave contributions by self-employed persons. No further VC can be made if the mandatory and voluntary contributions reach $37,740.

If you wish to contribute to your MA only, the amount you can contribute is subject to the CPF Annual Limit or the Basic Healthcare Sum, whichever is lower.

To find out your allowable contribution for both types of VC, you can use our e-Cashier.

If you’re making VC as a self-employed person, you can enjoy tax relief on your mandatory and voluntary CPF contributions based on the annual net trade income. If you’re an employee, tax relief is available only when you make VC to the Medisave Account.

Cap on Tax Reliefs

There is a personal income tax relief cap of $80,000 which applies from Year of Assessment 2018. This cap applies to the total amount of all tax reliefs claimed, including any relief on voluntary contributions and CPF cash top-ups made on or after 1 January 2017.

As accepted voluntary contributions and CPF cash top-ups cannot be refunded, you should take note of the overall personal income tax relief cap. You should evaluate whether you would benefit from tax relief before parting with your dollars.

Becoming More Ready for Retirement

Life has a way of creeping up on us. Before we know it, years might pass and some of us might find that we’ve barely started planning for the future. But if we’ve been working, we have actually been saving for our retirement since our first CPF contribution! And we have the opportunity to grow our CPF savings further by making cash top-ups and CPF transfers.

Thanks to the power of compound interest, the earlier you start to grow your savings, the more you’ll accumulate over time, giving you higher monthly retirement payouts in your golden years. And you’ll never have to worry about outliving your savings with lifelong monthly payouts when you join CPF LIFE.

For as little as a few dollars a day, you could be seeding the growth of your retirement nest egg in a risk-free manner. With a regular cash top-up of just $100 a month into your SA, the amount would grow to over $24,000* in 15 years. Or if you save more for a longer period, $200 a month for 20 years, you’ll end up with a tidy $72,000*.

The future may be closer than we think. We can be better prepared for it with our personal savings and CPF savings – and with top-ups and transfers to speed us along the way!

*Computed using the base interest rate of 4% p.a. on your Special Account. Terms and conditions apply.